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Personal Finance Terms 101: Effective Tax Rate

Watch more Personal Finance Terms 101 videos: Subscribe to Howcast's YouTube Channel - Learn about effective tax rates in this personal finance terms video tutorial. Howcast uploads the highest quality how-to videos daily! Be sure to check out our playlists for guides that interest you: Subscribe to Howcast's other YouTube Channels: Howcast Health Channel - Howcast Video Games Channel - Howcast Tech Channel - Howcast Food Channel - Howcast Arts & Recreation Channel - Howcast Sports & Fitness Channel - Howcast Personal Care & Style Channel - Howcast empowers people with engaging, useful how-to information wherever, whenever they need to know how. Emphasizing high-quality instructional videos, Howcast brings you experts who provide accurate information in easy-to-follow tutorials on everything from makeup, hairstyling, nail art design, and soccer to parkour, skateboarding, dancing, kissing, and much, much more. Your effective tax bracket is really important because it shows you what the net amount or percentage rate that you're paying in taxes. So let me just take a step back and give you a little context. Our tax system in this country is a graduated tax system, so you may be paying a little tax at the ten percent rate, and as you earn more money, than amounts above that might be taxed at the fifteen percent rate, all the way up to the highest tax brackets. Your effective tax bracket is really important because at the end of the day that's how much you get to keep. The two numbers most people want to know is their marginal tax bracket, what's the highest rate you're paying, and your effective tax bracket, what is that bottom line number at the end of the day after deductions, and after you account for the different accounts that you're paying. So I would encourage everyone to take out your tax return, or if you have an accountant do your taxes, take a look at it and see if you can ascertain what your marginal, and effective tax brackets are to help factor into your overall tax planning.
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